Can One Open a Roth IRA Without Holding a Job?
Internal Revenue Service rules allow you to contribute only certain types of income to a Roth Individual Retirement Account. In addition to income from a job, you may contribute self-employment income and amounts you receive as alimony.
Other People Are Reading
-
Function
-
The IRS allows Roth IRA contributions to come from wages, tips, salaries and commissions, in addition to nontaxable combat pay and military differential pay. However, you may also contribute amounts you receive as alimony, or self-employment income you earn as an independent contractor or from operating a small business.
Significance
-
If you do not have a job, your annual IRA contribution cannot exceed amounts you receive from alimony or self-employment income. For instance, if you received $2,000 in alimony and have no self-employment income, $2,000 is the maximum amount you can contribute to your Roth IRA. Unemployment benefits, stock dividends and rental property income don't count.
-
Spousal IRA Limit
-
The IRS also sets a spousal IRA limit, which, since 1997, has matched the normal limit. The spousal IRA limit allows non-earning spouses to contribute to their IRAs as long as they file a joint return with their partners. In addition, the couple's combined earned income must exceed their total IRA contributions.
Warning
-
If your Roth IRA contribution exceeds your earned income, as of 2010, the IRS charges a 6 percent excise tax on the excess amount each year it remains in the account. To avoid the penalty, you must remove the excess contribution, and any earnings it made, before your filing deadline.
-
References
- Photo Credit Comstock/Comstock/Getty Images
